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Saracen share price: Q1 production report in focus

We examine the key details behind Saracen's latest production results.

Saracen share price in focus Source: Bloomberg

Saracen welcomes record production

Saracen Mineral Holdings shares rose before falling away after the gold miner beat its quarterly production guidance despite Covid-19 restrictions.

Saracen produced 158,132/oz from its Australian operations in Q1, a record for its Australian business, at an average all-in-sustaining cost of $1,133/oz.

The company reported gold sales netted revenue of $369 million, as it booked an unaudited net profit after tax of $65 million to $70 million.

‘These results highlight the growth Saracen is enjoying at all levels of its business,’ Chief Executive Raleigh Finlayson said.

‘Our strategy of growing through a combination of exploration and production has resulted in record production, low costs and strong new cash flow.’

Shares in Saracen responded immediately. The stock was up 3.7% to $4.73 in early trading, up from its close of $4.50 yesterday. However the shares lost their lustre after the morning session and were changing hands at $4.50, below yesterday’s close, at 12:05 AEDT.

Negativity in the gold sector could have been behind the swing in sentiment. Fellow gold miner Newcrest Mining, Australia’s largest miner that reports its results on Thursday, was 2.8% down to $27.67. Another gold miner Evolution Mining, one of the best performers lately, was sitting a $5.31, down 0.4%.

This was against a flat morning session from the benchmark ASX 200 index, which was basically unchanged at 5,325.80 points.

Wild ride before Q1 results

Since 23 March, it’s been a wild ride for Saracen shareholders. Perhaps investors have ebbed and flowed between its safe haven status as a gold miner and its dividend status.

Back on 20 February, the company set the tone for investors before the magnitude of Covid-19 had hit home. Chief Executive Raleigh Finlayson said the miner wanted to keep its options open for growth and reduce its debt before paying its first dividend.

The company had just invested US$750 million ($1.115 billion) for a half share in the Superpit gold operations. But having told investors back in August that it would pay dividends of 20-40% net profit once its cash balance topped $150 million, shareholders were in the mood for a payout.

On 10 March, its shares were sitting at $4.07, before they crashed 28.5% to $2.91 on 16 March, then rallied back up 25.8% to $3.66 on 18 March, then back down to $2.79 by 20 March.

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